This is an often asked question. Typically, someone will have bought a property at auction in their own name, or from an off-the-plan development and then decide they want to buy the property in the name of their spouse or some other entity like their super fund.
The decision to change names often happens after they have discussed the purchase with their accountant and/or solicitor and things like asset planning and estate planning are raised.
Most people seem to think they can simply change the “purchaser” on the contract by inserting the words “or nominee”.
That process in most cases will not work and will result in you paying double Stamp Duty.
In NSW, the name on the Contract needs to be the same name on the Transfer document. On a $1,000,000.00 purchase price, the Stamp Duty payable by the purchaser is $40,490.00.
If the purchaser on the Transfer is different to the person on the Contract, then the Transfer will be treated as a sub-sale, resulting in a second or additional Stamp Duty amount of $40,940.00 being payable on the Transfer document.
There is an exception; for some limited circumstances contained in Section 18(3) of the Duties Act. This Section allows the ultimate purchaser to be a different person from the purchaser in the Contract, so long as they are related persons.
A related person includes a spouse, parent and child. It can also be a private company where the person is a director or majority shareholder of that company. It can also be a Trust where the natural person is a beneficiary of the trust.
The crucial point when applying S18(3) and which is often missed, is that the ultimate purchaser must have been “related” when the Contract was entered into. So you cannot form a company or trust after the date of the initial Contract.
If the “related person” exemption is not available, then your only real alternative is to attempt to persuade the vendor of the property to rescind the original Contract by mutual agreement and enter into a new Contract.
Sometimes this is possible; however, invariably you end up paying yours and the sellers the legal costs of the rescission of the initial Contract and the new Contract. Sometimes the vendor simply does not want to be involved in such a process
The best option in all cases is to seek appropriate advice as to the purchasing entity and buy it in the correct name from the very beginning.
Our property team at Everingham Solomons can assist you with all your property related matters because Helping You is Our Business.
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